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Informal unemployment and education

Listed author(s):
  • Ann-Sofie Kolm

    ()

    (Stockholm University)

  • Birthe Larsen

    ()

    (Copenhagen Business School)

Abstract This paper develops a four-sector equilibrium search and matching model with informal sector employment opportunities and educational choice. We show that underground activities reduce educational attainments if informal employment opportunities mainly are available for low-educated workers. A more zealous enforcement policy will in this case improve educational incentives as it reduces the attractiveness of remaining a low-educated worker. However, unemployment also increases. Characterizing the optimal enforcement policies, we find that relatively more audits should be targeted towards the sector employing low-educated workers; elsewise, a too low stock of educated workers is materialized.

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File URL: http://link.springer.com/10.1186/s40172-016-0048-6
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Article provided by Springer & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA) in its journal IZA Journal of Labor Economics.

Volume (Year): 5 (2016)
Issue (Month): 1 (December)
Pages: 1-36

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Handle: RePEc:spr:izalbr:v:5:y:2016:i:1:d:10.1186_s40172-016-0048-6
DOI: 10.1186/s40172-016-0048-6
Contact details of provider: Web page: http://www.springer.com

Web page: http://www.iza.org/en/webcontent/index_html?lang=en

Order Information: Web: http://www.springer.com/economics/journal/40172

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  1. Bosch, Mariano & Esteban-Pretel, Julen, 2012. "Job creation and job destruction in the presence of informal markets," Journal of Development Economics, Elsevier, vol. 98(2), pages 270-286.
  2. Costas Meghir & Renata Narita & Jean-Marc Robin, 2015. "Wages and Informality in Developing Countries," American Economic Review, American Economic Association, vol. 105(4), pages 1509-1546, April.
  3. Charlot, Olivier & Decreuse, Bruno & Granier, Pierre, 2005. "Adaptability, productivity, and educational incentives in a matching model," European Economic Review, Elsevier, vol. 49(4), pages 1007-1032, May.
  4. repec:dau:papers:123456789/1888 is not listed on IDEAS
  5. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June.
  6. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-849, November.
  7. Henrik Jacobsen Kleven & Martin B. Knudsen & Claus Thustrup Kreiner & Søren Pedersen & Emmanuel Saez, 2011. "Unwilling or Unable to Cheat? Evidence From a Tax Audit Experiment in Denmark," Econometrica, Econometric Society, vol. 79(3), pages 651-692, 05.
  8. Fugazza, Marco & Jacques, Jean-Francois, 2004. "Labor market institutions, taxation and the underground economy," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 395-418, January.
  9. Daron Acemoglu, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, Oxford University Press, vol. 111(3), pages 779-804.
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